Tax co-operation is essential for global business

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The following letter was published in the FT today:

Tax co-operation is essential for global business

Sir, Treasury ministers should take notice of the survey of large companies you report showing strong support for taxation of large European firms on a consolidated basis ("Europe's business backs tax harmony, says poll", September 25). The UK has been dragging its feet on this initiative, probably due to a misplaced fear that it would be portrayed as giving up tax sovereignty. Nothing could be further from the truth.

Stronger tax co-operation is the best way to strengthen national tax systems, and is essential in this age of globally integrated business and high mobility of financial capital. Regrettably, HM Revenue and Customs did not even mention the possibility of consolidated or unitary taxation in its recent consultations on taxation of overseas earnings and on transfer pricing.

Yet not only is momentum building in its favour within Europe, influential commentators in the US linked with the Democrats (the Hamilton project) have also advocated its adoption. Although KPMG was apparently surprised by the outcome of its poll, it clearly indicates a strong body of business opinion frustrated not only by the complexity of international tax, but also by the pressures it creates for tax arbitrage and tax avoidance through profit shifting.

The differences between companies in their willingness to yield to such temptations creates significant competitive distortions. Strong support by the UK for a shift to unitary taxation, not only within Europe but internationally through the Organisation for Economic Co-operation and Development and other bodies, would greatly help to begin to build a stronger foundation for the international tax system in the face of economic globalisation.

Richard Murphy

Sol Picciotto

Senior Advisers,

Tax Justice Network-UK

This, of course, follows on from TJN's submission of evidence to HMRC on the need for unitary taxation in the UK.